McDonald's Gets Defensive

McDonald's (NYSE: MCD) just pulled off another admirable quarter, powered by its simple focus on slinging low-priced burgers to bargain-hunting consumers. With the entire restaurant industry anticipating tough times ahead, these strengths should be more valuable than ever.

Fourth-quarter net income increased 2%, to $1.24 billion, or $1.16 per share. Revenue jumped 4%, to $6.21 billion. Global same-restaurant sales increased 5%. Despite the beleaguered U.S. market, McDonald's fared fine, even with a bout of nasty December weather. McCafe coffee offerings and the McRib helped drive more traffic through the Golden Arches.

The full-year numbers were more encouraging, with sales up 6% and EPS ticking 11% higher. Comps came in at a solid 5% increase.

McDonald's may be well known as a discount fast food company, but it plans to selectively raise prices on some menu items in 2011. That's no surprise, given rising commodity prices across the globe. McDonald's should fare better than many other restaurant rivals amid this inflation, as diners pinched by expanding food costs increasingly turn to its relatively cheaper offerings.

The Golden Arches remain a bulwark of stability in an increasingly tumultuous fast-food market. Burger King has gone private, Wendy's/Arby's (NYSE: WEN) is in talks to sell the Arby's concept, and Yum! Brands (NYSE: YUM) plans to shed Long John Silver's and A&W, leaving the company with its far stronger KFC, Pizza Hut, and Taco Bell brands.

McDonald's used to dilly-dally around with other concepts, but it doesn't mess around with additional noise anymore. Chipotle (NYSE: CMG) has stood on its own since 2006, and is now experimenting with a new concept itself. McDonald's ditched its minority interest in Redbox in 2009 and rid itself of its stake in U.K.'s Pret A Manger the year before. Its disastrous Boston Market experiment ended in 2007.

Research firm NPD Group recently highlighted restaurant traffic declines in many major markets across the globe, including the U.S. Although China's customer traffic to restaurants jumped 16.2% in the third quarter, with customer spending up nearly 18%, many markets struggled with economic difficulties. In the U.S., traffic slipped nearly 1%, although customer spending increased 1.8% on higher restaurant checks.

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